Q.2. The
responsibility of finance manager is now regarded as much more than ere
procurement of funds. What do you think are the other responsibilities of
finance Manager?

Q.3. (a)
Depreciation and retained earnings are the internal sources of finance. Discuss

(b) Debenture capital is the cheapest source of funds
Discuss.

Unit-II

Q.4. (i)
From the following information determine the expected rate of return.

Green Valley

Skyiark

Investment (Rs)

Return

Pessimistic

Most likely

Optimistic

Rs.

Pro

Rs.

Pro

1,00,000

19

18

24

0.3

0.4

0.3

1,00,000

12

18

29

0.3

0.4

0.3

(ii) A company has 2000000 6% debentures outstanding today.
The company has to redeem the debentures after 5 years and establishes a
sinking fund to provide funds for redemption. Sinking fund investments earn
interest @ 10% p.a. The investments are made at the end of each year. What
annual payment must the firm make to ensure that the needed Rs. 20, 00,000 is
available on the designated date?

Unit – III

Q.6. How
does the traditional view of the capital structure differ from net income
approach and net operating income approach? Explain.

Q.7. A
Company provides the following information to you

Equiry
earning Rs. 4, 00,000

Dividend
paid Rs. 2, 20,000

Price
earning ration (PE Ratio)-8

Required
rate of return is 15 per cent

a.Determine
whether the company’s D/P ratio is optimal according to waiter. The company’s
paid up equity share capital is Rs. 40, 00,000 with face value Rs. 100 per
share. It is expected to maintain its current rate of earnings on total assets.

b.What
should be the P/E ratio at which the dividend payout ratio will have on impact
on the share price?

c.Will
you decision change if the P/E ratio comes down by 2?

Q.8. Performa
cash sheet of a company provides the following particulars.

Material 40%

Direct
Labour 20%

Overheads 20%

The
following information is also available:

a.It
is proposed to maintain a level of activity of 200000 units.

b.Selling
price of Rs. 12 per unit.

c.Raw
materials are expected to remain in store of an average period of one month.

d.Materials
will be in process on an average half a month.

e.Finished
goods are required to be in stock on average period of one month.

f.Credit
allowed to debtors in two month.

g.Credit
allowed by suppliers is one month.
Estimate working capital required.

Section-C Marks
8

Q.9. Attempt
the following question

You are a financial analyst of XYZ Company Ltd. The director
of capital budgeting has asked to analyse two proposed capital investments
project P and Q. each has a cost of 10 lakhs as the cost of capital for each
project 12%. The project’s expected net cash flows are as follows:

Expected net
cash flows

Year

Project ‘P’

Project ‘Q’

0

1

2

3

4

(10,00,000)

650000

300000

300000

100000

(10,00,000)

350000

350000

350000

350000

Required

a.Calculate each project’s payback period NPV and IRR.

b.Which project or projects should be accepted. If they are independent?

c.Which project should be accepted if they are mutually exclusive?

d.How might a change in the cost of capital (Ko) produce a conflict
between the NPV and IRR ranking of these two projects? Would this conflict
exist if ‘Ko’ were 5%?